Every day, there are more than 250,000 confirmed Bitcoin transactions globally.
Bitcoin is just one of many examples of digital assets, and while it’s perhaps the most well-known, many investors are interested in others. These assets vary in terms of the purpose they serve, how you can invest, the risks they carry, and more. If you’re interested in the world of digital assets, it’s important to understand what they are.
In this guide, we’ll take a look at some of the most popular types of digital assets along with some examples. Keep reading for more.
What Are Digital Assets?
The term “digital assets” can cover a wide range of assets that exist virtually. This can include things like photos, videos, documents, and more.
With that said, when most people talk about digital assets, they’re referring to assets that use blockchain technology. These types of assets can be bought, sold, and traded online and are very popular among investors.
Risk Mitigation
As with any kind of investment, digital assets involve a degree of risk, and this can vary significantly. This is one of the most important things to understand when dealing with digital assets. If you make mistakes here, you could face significant losses.
Risk Exposure
One of the many criticisms that digital currencies have faced over the years is the level of risk involved. Cryptocurrencies are very volatile, so many individuals have made sizable investments only for the value of an asset to drop shortly after. Remember that digital assets can go up and down in price rapidly before making any investments.
Storage of Assets
One of the worst things that can happen with digital assets is for them to be stolen. It’s vital that you store any assets you own securely. Hardware wallets are ideal here; just make sure you understand how they work before using them.
Potential Scams
Scams and hacks are another major issue in the crypto space. There are plenty of criminals out there who are constantly trying to steal digital assets from others.
Do your best to stay up to date with the latest scams so you know what to be on the lookout for. It’s also important to be aware of hacks. These can happen on exchanges, which is one of the reasons it’s so important to move your assets to a separate wallet.
Best Examples of Digital Assets
There are various types of digital assets available, and some are more popular than others. Understanding the different options will help you make the best investment decisions.
Cryptocurrencies
Cryptocurrencies are arguably the most popular digital assets and typically act as a form of currency. All crypto is kept on a public ledger known as a blockchain, and there are now multiple of these in existence.
The first was the Bitcoin blockchain, and several others have appeared over the years. You can buy, sell, and trade cryptocurrencies on crypto exchanges.
Cryptocurrencies are considered decentralized as (unlike fiat currencies) they’re not controlled by any governments or financial institutions. This is one of the main reasons they’re so popular, along with the level of security, anonymity, and potential investment returns.
Some of the most popular cryptocurrencies include:
- Ethereum (ETH)
- Solana (SOL)
- Litecoin (LTC)
- Cardano (ADA)
- Polygon (MATIC)
As it stands, there are more than 23,000 cryptocurrencies available to invest in. Make sure you do your research before making a purchase.
Security Tokens
These are essentially a digital form of other real-world assets that may not be overly practical to invest in. If these are tokenized, things can be far simpler.
Some common examples are:
- Stocks
- Bonds
- Real estate
- Plant
- Equipment
By including tokens in your investment strategy, you can diversify your portfolio without having to worry about owning physical assets.
NFTs
NFTs (non-fungible tokens) are noteworthy as each one is unique. Where any two Bitcoins are exactly the same, every NFT is different.
These gained a huge amount of popularity in recent years in the form of digital art. Many NFTs reached values in the hundreds of thousands, with the most expensive NFT selling for $91.8 million.
Many NFTs are launched as parts of collections. Some of the most popular NFT projects include:
- Bored Ape Yacht Club
- Doodles
- CryptoPunks
- VeeFriends
NTF technology serves as an excellent way to define ownership rights. Ethereum is the most popular blockchain for NFTs, but several others also support them.
Stablecoins
Stablecoins are digital currencies similar to cryptos, but they’re distinctive in the fact that they’re pegged to another currency, commodity, or financial instrument. This helps prevent volatility, which makes stablecoins stay at the same value at all times.
Many people use stablecoins as an effective way to make cross-border payments as fees are typically low. They’re also becoming more popular as a payment method for various products and services.
Some of the largest stablecoins are:
- Tether (USDT)
- USDC (USDC)
- Dai (DAI)
- TrueUSD (TUSD)
It’s important to note that even with the resistance to volatility, things can still go wrong with stablecoins, as they did with terraUST (UST).
Central Bank Digital Currencies (CBDCs)
CBDCs are digital currencies that operate in a similar way to cryptocurrencies, but they’re sanctioned by central banks. As such, they’re linked to the nations of those banks.
The technology makes them more efficient than traditional fiat currencies. Many investors are skeptical, however, as they don’t offer some of the key benefits of crypto like anonymity and decentralization. Most countries don’t have CBDCs in place, but some are already in circulation, such as:
- Sand Dollar (Bahamas)
- Naira (Nigeria)
- Digital Rupee (India)
- Digital Ruble (Russia)
Should You Invest in Digital Assets?
With all these examples of digital assets, it can be hard to determine if you should invest in any, and if so, which ones? For many people who are interested in digital assets, crypto is the best place to start. Once you have a good understanding, you might want to consider other options.
TrueCode Capital is a leading cryptocurrency hedge fund designed to help investors. We use advanced algorithms to make the best-informed investment choices, and as of July 2022, our fund had outpaced Bitcoin by +23%. If you’re interested in learning more about building a strong portfolio, take a look at our Risk Management book today.
